The Centre for the Study of the Economies of Africa (CSEA), a leading think-tank research organization with primary focus on development trends in African economies, has advised the monetary authorities on the need to begin to consider factors in determining the Monetary Policy Rate (MPR) and others in future meetings of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
The research firm gave the advice in its latest Nigeria Economic Update Issue 38 after critically examining the recent decisions of the MPC, particularly those taken during its 281st meeting when the MPR was retained at 11.5 percent and other economic factors in the country.
The research analysts at the CSEA noted that apart from the MPR, other monetary parameters were kept constant including the Cash Reserve Ratio at 27.5 percent and the Liquidity Ratio at 30 percent.
They stated that the rates were retained largely as a result of the declining rate of inflation and the improvement in the growth rate of Gross Domestic Product.
The experts, while seeing the decisions of the MPC as justifiable to some extent, they however cautioned that the continuous double digit MPR may” limit the availability of funds to the private sector, which is required to spur aggregate supply in order to achieve lower levels of inflation.
“This is underpinned by the fact that inflation in Nigeria is recognised to be mainly cost push rather than demand pull, and as such cannot be solely contained by monetary policy.
“Going forward, programmes to address structural factors that continue to exert upward pressure on prices should be integrated with ongoing monetary policy interventions”, the experts canvassed.
